Learnbonds UK

Top 10 Fixed Rate ISAs & ISA Rates (Updated 2019)

06. November 2019

When it comes to savings and investing, we all are hard-coded to always look for the better option. But what happens when you only get one chance to make the right decision every year, as in the case of Individual Savings Accounts (ISA)?

With the stakes this high, it is imperative that you spend enough time searching for the best ISA account with the highest rates. But who has the best ISA rates today? And are favorable returns the only thing you have to put into consideration when deciding on the best ISA? We believe that good rates should be accompanied by an even better reputation.

For this reason, we have tried and tested the best different ISA account providers and come up with a list of what we consider the most reputable service providers with the highest rates.

What is an ISA?

Put simply, an Individual Savings Account is a class of investment and savings with favorable tax status. These include the fact that amounts deposited into this account are tax exempt. And so are earnings accrued from investments made through this accounts. There is a caveat though, as there is a limit to the amount of money you can deposit into this account per year as well as the number of accounts you can open and deposit to within the same year.

In the United Kingdom, for instance, you can only save a maximum of £20,000 into a single ISA account for the financial year 2019/2020. Extra deposits into the same or different ISA accounts are subjected to the income and capital gains taxes.

What are the different types of ISAs currently available?

Cash ISAStocks and shares ISA Innovative Finance ISALifetime ISAJunior ISA

Cash ISA has all the features of an ordinary savings account, with the only exception here being the fact that interests earned from the account are tax exempt. You can open the cash ISA with your bank or building society. Note that the maximum allowed deposit in one financial year for a Cash ISA is £20,000.

This refers to the tax-free money invested with ‘Qualifying investments.’ Your investment ISA service provider has the right to express their discretion in determining what stocks and equities ‘qualify’ for their investments. Some of the most popular though include cash, Unit trusts, and public debt securities like treasury and corporate bonds as well as exchange-traded shares of listed companies.

These were created in the appreciation of the fact that there exist numerous other investment options outside the ordinary stocks and shares markets. Ideally, these will only be provided by Peer to peer lending platforms that are registered and regulated by FCA and HM Revenue & Customs. The maximum you can invest with an IFSAS P2P lender is capped at £20,000 for every financial year.

Formerly known as Help-To-Buy ISA (HTBISA), Lifetime ISA is specially designed to help you save for the future or encourage you into pursuing a once-in-a-lifetime objective like buying a house. Virtually anyone above 18 years and below 40 years can open a lifetime ISA account that matures upon hitting 50 years. You are, however, not allowed to invest more than £4,000 into this account per financial year. The most unique thing about this is that the government pledges to top you up with 25% of your invested amounts every year.

As the name suggests, this refers to an ISA account made available to children under the age of 18 and primarily fall within the cash or stocks and shares category. Parents/guardians can open the accounts for their children below 16 years whose maximum allowable per year stands at £4,638.  A child above 16 years of age can, however, open their own accounts or have the accumulated deposits in the junior account that has their guardians as co-signatories transferred to their new individual savings account.

Note: You can request to withdraw your funds in an ISA account at any time, which must be availed to you within 30 days. However, the ISA service provider has a right to penalize withdrawals with interest penalty implying you stand to lose any profits accumulated from the arrangement.

Why do you need an ISA?

  • Interest-free incomes: No one fancies the idea of income and capital gains taxes eating 20% to 40% of their incomes. Investing or saving your cash in the tax-free ISA, therefore, goes a long way in ensuring that you legally avoid these taxes.
  • Investments let you chose your risk level: If you were to turn these funds into an investment ISA, what would be your risk tolerance level? Are you an all-or-nothing aggressive investor or the conservative type that is more concerned with the protection of their investments than the interests they gain? Most investment ISA service providers have come up with different investment options with varying levels of risk ranging from the hugely conservative to the most volatile niches. And you have the option of deciding how your money is invested.
  • You still have access to your funds: Need your cash back? The broker is required to make it available to you within 15 days for cash ISA and within 30 days for shares and stocks ISA, no questions asked. Plus you are also free to transfer your funds to another ISA service provider if you feel like the current investor offers below-average interest rates.
  • Adds to your tax-free allowances for the year: ISA doesn’t affect your current free tax allowance and will therefore not count as part it. Rather ISAs serve to widen the tax-free income scope by broadening the amount of your income that is not subject to taxes.
  • You can either save or invest: The ISA accounts types are relatively diversified and separated into both savings and investment accounts. You, therefore, have the option of saving for such future goals as retirement or buying your first house with lifetime ISA account or compound your wealth by investing in stocks and shares ISA.

What are the pros and cons of saving and investing in an ISA?

Pros

  • Not subject to capital gains and income taxes effectively reducing tax incidence on your incomes
  • Present you with a wide range of accredited investment options
  • ISA status can be inherited without losing accrued benefits
  • Welcoming to all persons regardless of their age or net worth
  • Can be withdrawn anytime, tax-free, and no questions asked

Cons

  • Amount of contributions capped at £20,000
  • The tax-free annual allowance cannot be carried forward to the next year
  • Withdrawn funds cannot be re-invested without losing the tax-free benefit

Best ISA rates for 2019

1.   Blend – 15%

Blend is peer to peer lending ISA platform specializing in property loans. The lending club promises to help get back your investment with an interest rate of between 8% and 15% depending on your invested amounts and the duration of the loan. Typical loans here have a maturity of between 12 and 36 months with longer repayments attracting higher interest rates.

Investing with Blend, however, requires a minimum deposit of £1000 with the option of reselling the loan in a secondary market at a fee of 0.6% the loan amount. To guarantee the safety of your cash in this high-risk venture, all of Blend loans are secured by the underlying property for which these loans were requested.

Pros:

  • Attractive interest rates with a low management fee
  • Secured loans reduce instances of defaulting
  • Open to individuals of all walks of life above 18years
  • Dedicated customer support

Cons:

  • One may consider their £1000 minimum deposit relatively high

2.      LendingCrowd – 8%

Lending club is yet another peer to peer lender that specializes in offering business loans to Scottish businesses. The lender promises to generate your invested amounts as much 8.1% should you open one of their three investment accounts. If you want low risk and highly diversified portfolio, consider their growth rate that distributes your £1000 minimum deposit into several loans and automatically re-invests any interests derived therein.

Their £1000 income account has all the features of the growth rate account safe for the fact that it doesn’t re-invest accrued incomes but put it into a separate account for free withdrawal. There is also the Self-select account that gives you the choice to determine the markets that you invest and the rate at which you advance your deposits.

Pros:

  • No charges on income withdrawal
  • Process automation makes reinvesting highly probable
  • Attractive investment options for both beginners and experienced ISA investors
  • Care for both investors seeking regular returns and long term minded savers

Cons:

  • No security against your investments exposing you to losses from defaulters.
  • High cases of loan defaultersthat currently soars above 4%.

3.      Hargreaves Lansdown

Hargreaves Lansdown is a leading Stocks and SHARES ISA that helps shield as low as £100 to as much as £20,000 of your incomes every year from the capital gains and income taxes. The investment broker has over the years come up with a list of what they consider the 50 most promising funds in the U.K that have also agreed to slash their annual management fees by 30% for Hargreaves Lansdown clients. More importantly, you have the option of exercising your investment skills and hand-picking your preferred funds to invest in without assistance, hire an investment portfolio manager or simply adopt one of the several pre-built investment portfolios available on the P2P lender’s website.

Pros:

  • Highly diversified investment portfolio reduces risk
  • Partnership with funds bring down trading cost and push possible returns up
  • Dedicated customer care and portfolio managers make it beginner friendly
  • Low minimum balance at lump sum £100 and £25 for monthly payments

Cons:

  • Invests in the highly volatile money markets
  • Ready-made portfolios are never a one-fit-all and portfolio management comes at extra costs.

4.      Mintos – 11.83%

Mintos, yet another P2P lender, makes it to our list of best ISA rates providers due to its attractive annual interest on investments that currently stands at 11.83% and highly versatile platform. Mintos’ biggest selling point is the fact that you have the option of using their auto-invest tool that lets you decide on the types of loans to invest in or go through all the requests manually.

Plus Mintos is an international FinTech industry operative with an active presence in over 72 countries across the globe. This has ensured that the Mintos platform is packed with numerous technical tools that allow you to filter borrowers profiles based on such factors as their credit history and geographic location.

Pros:

  • Numerous types of loans offered here easing the diversification process and reducing default incidences
  • Gives you full control over your investments
  • Interests gained is available for withdrawal every end month
  • No minimum investments

Cons:

  • Buyback guarantee on the secondary market not available to all types of loans

5.      Property crowd – 11%

PropertyCrowd describes itself as a professional property crowdfunding platform for savvy investors. It is a peer to peer lending platform that specializes in investments within the property markets with the promise of up to 11% /year. The P2P lender argues that their investments are backed up by property bonds that aren’t just less volatile than stocks and equities but their interest rates are also way higher than the conventional treasury and corporate bonds. To drink from this pot, however, you will need a minimum investment of £1000.

Pros:

  • Less than industry average wait time for loan maturity – between 6 and 18 months.
  • Ability to co-invest along with pro investors and market analytics
  • Thorough research on possible investments

Cons:

  • High minimum investments
  • Not beginner friendly

6. Leeds Building society – 2.1%

In an age of declining bank rates, Leeds Building Society maintains some of the highest interest rates for Cash ISA. The U.K-based building society offers a fixed interest rate of 2.1% for investments into their ‘5 Year Fixed Rate Cash ISA’ for deposits above £100. The builder doesn’t have a minimum deposit or operating balance but amounts less than £100 will attract a lower 0.05% variable interest rate.

This implies that if you invested £10,000 today, you would earn £1095.0 as interest by the end of the five-year term. However, should you decide to withdraw or transfer all or a portion of the deposited funds, the company will deduct a full year’s interest rate from the withdrawn amount implying that you can get back less than the originally invested amounts.

Pros:

  • Open to anyone above 16 years
  • Same day withdrawals for amounts less than £300 available
  • Allows for the free transfer of funds between different building society accounts

Cons:

  • Interest deducted on withdrawals and transfers is exorbitant
  • Highly rigid, doesn’t support monthly or quarterly interest withdrawal

7. Aldermore – 1.70%

Aldermore is a UK banker specializing in personal accounts that offer guaranteed interests. And one of the most interesting accounts managed here is the fixed-rate cash ISAs with different maturity dates and competitive interests of up to 1.7% AER. The banker maintains the 1-, 2-, and 3- years fixed rate cash ISAs whose interest are set at 1.45%, 1.60%, and 1.70% per annum respectively.

To open the fixed-rate ISA with Aldemore bank, you need to be a permanent UK resident above 18 years. You also must be in a position to raise the £1, 000 minimum initial deposit required to activate the account. Note that the account doesn’t accept further additions. The amount you seek to save must be, therefore, be deposited into the bank account within 14 days of account opening. These can be drawn from your savings or transfers in from another cash or non-cash ISA.

The maximum you can deposit into the account for the current financial year is capped at £20,000. There however is no limit to how much you can transfer in or the maximum operating balance. Nonetheless, the FSCS will only insure your deposits for up £85,000.

Pros:

  • The is no limit to the deposit account balance you can maintain with the banker
  • FSCS insures your deposits up to £85,000.
  • Fast and relatively easy account opening process that can be managed online or at the physical bank branch

Cons:

  • One might consider their £1,000 minimum initial deposit uncompetitive
  • Early withdrawals attract a punitive 90-180 day loss of interest earned

8. Paragon Bank – 1.80%

Paragon bank offers medium to long-term fixed rate cash ISAs. The 3- and 5-year attract highly competitive interest at the rate of 1.70% and 1.80% p.a respectively. The high interest rate will however only apply to interests withdrawn upon maturity of the ISA account. Should you wish to make monthly withdrawals of the earned interest, you will have to settle for the lower rate of 1.69% and 1.79% for the 3 and 5 year ISAs respectively.

The banker will only accept lump-sum deposits into the account within 14 days of account opening. And like most other ISAs the maximum you can deposit for the year is £20,000 but transfers in and the maximum account balance are capped at £500,000.

The account can only be opened and managed via post or online. And they are only open to permanent UK residents above the majority age. Plus you also need to be in a position to raise the minimum initial deposit of £500 required to activate the account.

Pros:

  • Allows for transfers in from both cash and non-cash ISAs
  • At £500,000, one may consider their ISA maximum operating balance quote attractive
  • You can manage your account conveniently online or via post.

Cons:

  • Premature access to the deposits will cost you up to 270 days earned interest.

9. Union Bank of India UK Ltd – 2.15%

The Union Bank of India UK doesn’t just have one of the widest range of fixed-rate ISA accounts but it also maintains some of the best interest rates in the industry. Here, ISA terms range from one to five years with the guaranteed fixed interest starting from 1.70% to 2.15% for the 1- and 5-year ISAs respectively. And you only need a minimum initial deposit of £1,000 to activate the account.

Account opening is relatively straightforward and can be done online, via post, or email. However, you will need to visit the physical bank branch for such account management services as transfers out or withdrawals. You should also note that the maximum you can hold in any of the fixed-rate ISAs here is capped at £1 million.

Pros:

  • You can still perform basic account operations like checking balances and earned interests online
  • Relatively low initial deposit and attractive maximum account operating balance
  • Has some of the most competitive interest rates 
  • Straightforward account opening process

Cons:

  • Doesn’t support further deposits or premature withdrawals

10. Cynergy Bank – 1.76%

Cynergy appeals most to individuals looking for short to medium term high-interest savings accounts. And in their basket of guaranteed interest savings accounts is the 1- and 3-year fixed-rate ISAs. These earn you relatively competitive interest rates of 1.63% and 1.76% p.a respectively. However, their most popular fixed ISA yet is the 2-year savings account dubbed Loyalty Fixed Rate ISA.

To open the account, you must be a permanent UK resident above 16 years and be in a position to raise the required minimum initial deposit of £500. The Loyalty account is nonetheless a preserve of existing Cynergy bank clients (must have been with the bank for 6+ months).

Some of the most interesting features of these fixed-rate ISAs include the fact that they don’t have a maximum operating balance. Plus unlike most banks that don’t accept further deposits, you can always make further additions to the fixed-rate ISA opened at Cynergy. These can be from your savings or transfers in from either another cash ISA or a stock and shares ISA. Premature access to these ISA will also attract a penalty fee amounting to a 180-day loss of interest.

Pros:

  • The account is available to any UK resident above 16 years
  • Supports further additions into the fixed-rate cash ISA long after opening
  • The banker is FCA regulated and deposits are FSCS protected for up to £85,000.
  • The account doesn’t have a limit on the maximum operating balance

Cons:

  • Though attractive, the Cynergy loyalty fixed rate ISA is only available to existing bank clients
  • One may consider the 180-day loss  relatively punitive

Bottom line

Saving and investing your way out of the often high taxes is no longer an illusion. Any ISA ensures that you add over £20,000 into your taxable allowance every year. But it is often not enough to shield this money from income and capital gains taxes. You need to invest in a platform that guarantees highest returns and maximal protection of the funds from unnecessary risks.

Most of the accounts we have listed here make it possible to invest your finances in a low risk and low volatile markets and still promise attractive interest rates, higher than you can ever get with ordinary savings account with your banker. It is a high time you embraced ISAs both as a tax reduction measure and a viable investment opportunity.

What different types of ISAs are there?

There are a number of different ISAs available in the UK. If you are looking for a specific type, click on one of the links below to read a detailed guides about it.

FAQs

What is ISA?

The individual savings account (ISA) is a tax-free saving or investment account that allows you to deposit up to £20,000 annually. Different ISAs that allow for investing into varied sectors of the economy like P2P lending and stocks and shares have, however, cropped up over the years effectively giving you the freedom to determine where to invest your cash.

Who can open an ISA?

Virtually everyone above 16 years of age and a permanent U.K resident can apply for an ISA account. Children under the age of 16 can also have their guardians open and run a junior account on their behalf.

How much do I need to start saving in an ISA?

There is no minimum to the amount of cash you can deposit into an individual savings account.

How much can I save/invest in an ISA?

The maximum amount of money you can deposit into an ISA is relative to the type of ISA account you want to invest in. For instance, if you wish to open a Cash or Stocks and Shares ISA, the maximum allowable here is capped at £20,000. Junior and Lifetime ISA, on the other hand, have their maximum allowable capped at £4,000 and £4,638 respectively as at 2019.

What is the difference between an ordinary savings account and the ISA?

First off, the amounts deposited in your ordinary savings account with your banker and interests gained here count towards your taxable incomes while the ones in an ISA don’t. Your deposits with an ordinary savings account can only attract the standard bank interest rates while the ISA gives you the freedom to transfer your investments freely into different types of ISAs that offer above average returns.

Is the interest accrued on an ISA taxed?

No, just as the monies deposited therein, interests derived from investing these funds into different income generating opportunities like bonds and p2p lending are also tax exempt.

When can I transfer my savings/investments to another ISA service provider?

You have the right to freely transfer deposits from one ISA service provider to another. You can, however, only transfer deposits from one type of ISA to a similar account provided by the different banker. For instance, you can only transfer Cash ISA from platform A to another Cash ISA to platform B and not to a Shares and Stocks account. Note that you are better off letting your ISA company conduct the transfers as withdrawing funds from one and investing it with the another more than once in a year often leads to the cancellation of the forfeiting of the tax-free advantage.

 

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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